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A tale of two gaps – A Comment on the European Solidarity Manifesto

Author

Listed:
  • Piergiorgio Gawronski

    (Scuola Nazionale dell'Amministrazione)

Abstract

The paper by Kawalec and Pytlarczyk (2012) (henceforth, K-P), and the shorter “European Solidarity Manifesto” (http://european-solidarity.eu/; henceforth, ESMA), address two different set of questions. (1) Should the Euro be dismantled? What is the origin of the Eurozone (EZ) depression? Is it temporary or curable? In their view, the ‘key problem’ is the loss of international competitiveness of the weakest EZ countries; the competitiveness gap is “very difficult or even impossible to correct without a devaluation” (given the price/wage downward stickiness, and the limits to austerity posed by democracy); and if corrected, it may easily arise again in the future. Hence the Euro should be dismantled. (2) How should the Euro be dismantled? Their view is that it should start with a German exit, and should be managed in a cooperative way. K-P describe their preferred procedure. I will here discuss only the first, more fundamental set of issues. I will argue that in principle the Euro is curable, but won’t be cured. The economic problems of the EZ periphery – unemployment, public debt, banks weakness, etc. – all arise from a lack of economic growth. I will therefore start by asking what is, and is going to be in the next 10 years, the main constraint in the EZ on growth. I will also discuss the role of the ‘competitiveness gap’ in this respect. I will end with some thoughts on the optimal political strategy to solve the Euro conundrum. Italy will be used as a case study to illustrate some more general points.

Suggested Citation

  • Piergiorgio Gawronski, 2014. "A tale of two gaps – A Comment on the European Solidarity Manifesto," a/ Policy Briefs Series 1403, Italian Association for the Study of Economic Asymmetries, Rome (Italy).
  • Handle: RePEc:ais:pbrief:1403
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    File URL: http://www.asimmetrie.org/wp-content/uploads/2014/10/APB2014-03.pdf
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    References listed on IDEAS

    as
    1. Stefan Kawalec & Ernest Pytlarczyk, 2012. "Controlled Dismantlement of the Euro Area in Order to Preserve the European Union and Single European Market," CASE Network Studies and Analyses 441, CASE-Center for Social and Economic Research.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. goofy3: istruzioni per l'uso
      by Alberto Bagnai in Goofynomics on 2014-11-04 00:48:00

    More about this item

    Keywords

    Inflation; Policy coordination; Eurozone crisis; Fiscal policy; Economic integration;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • F15 - International Economics - - Trade - - - Economic Integration

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